Economics Grade Report

Detailed performance breakdown and feedback

Total Score

94 / 104

Outstanding Performance!

Performance Breakdown & Feedback

1. Question 1(a)

Excellent

Score: 2/2

Breakdown:

  • Identified "income is not stable" (1 mark)
  • Identified "need to provide their own capital good" (1 mark)

Feedback:

Excellent. Both disadvantages correctly identified.

2. Question 1(b)

Excellent

Score: 2/2

Breakdown:

  • Correctly identified smartphones and motorcycles as "capital good" (1 mark)
  • Explained they are "used for further production and earn income" (1 mark)

Feedback:

Excellent. Identification and reasoning are clear and accurate.

3. Question 1(c)

Excellent

Score: 5/5

Breakdown:

  • Implicitly identified "Law of diminishing marginal returns" (1 mark)
  • Defined it accurately as "when more units of a variable factor are successively added to a given fixed factor, the marginal product will eventually diminish" (3 marks: 1 for variable/fixed factors, 1 for marginal product diminishing, 1 for holding technology constant)
  • Applied it correctly: "the rider's are the variable factor and the firm operating is a fixed factor" (1 mark)

Feedback:

Excellent. Comprehensive and accurate explanation and application.

4. Question 2

Excellent

Score: 4/4

Breakdown:

  • Identified a $20 surcharge on all taxi trips (1 mark)
  • Explained the percentage increase in fare is less for longer distances, reducing the relative price of longer-distance travel (1 mark)
  • Deduced this increases the proportion of passengers taking longer trips (1 mark)
  • Concluded the "average travel distance would also increase" (1 mark)

Feedback:

Excellent. Logical explanation of relative price changes. The final sentence regarding the 'law of demand' was off-topic but did not detract from the core correct reasoning.

5. Question 3

Excellent

Score: 3/3

Breakdown:

  • Identified "Vertical backward integration" (1 mark)
  • Provided "steady supply of food" (to ensure a steady supply of raw materials) as a motive (1 mark)
  • Identified "economies of scale" as a motive (1 mark), despite a minor grammatical error

Feedback:

Excellent. Correct integration type and two valid motives provided.

6. Question 4

Excellent

Score: 4/4

Breakdown:

  • Identified "market information is imperfect" (1 mark) and explained with consumers not knowing "all the price information" (1 mark)
  • Identified "selling heterogeneous product" (1 mark) and explained with "batteries or quality" varying (1 mark)

Feedback:

Excellent. Two distinct reasons with adequate explanations provided, despite minor grammatical issues.

7. Question 5(a)(i)

Excellent

Score: 2/2

Breakdown:

  • Stated "No" (1 mark) and explained salary was "not a current production carried out by resident producing unit" (1 mark)

Feedback:

Excellent. Clear and concise answer.

8. Question 5(a)(ii)

Excellent

Score: 3/3

Breakdown:

  • Stated "Yes" (1 mark)
  • Implied Mr. Chan is a "Hong Kong resident" ("from The Hong Kong resident") (1 mark)
  • Stated it is a "factor income from abroad" (1 mark)

Feedback:

Excellent. Reasoning is sound and covers all necessary points.

9. Question 5(b)

Needs Improvement

Score: 0/2

Breakdown:

  • Recommendation of "British Pound" was not supported by sound economic reasoning. Explanation regarding the "linked rate system" and "GBP is more stable" was contradictory and showed misunderstanding of the stability provided by the linked exchange rate system (1 mark for reason, 1 mark for explanation missed)

Feedback:

Economic reasoning for currency recommendation was confused. The HKD linked exchange rate system provides stability between HKD and USD, not GBP. Recommending GBP based on "more stable" in the context of HKD's linked rate is incorrect. Understanding the implications of the linked exchange rate system on exchange rate stability between HKD and USD is crucial.

10. Question 6(a)

Excellent

Score: 1/1

Breakdown:

  • Correctly calculated the required reserve ratio as 20% (1 mark)

Feedback:

Excellent.

11. Question 6(b)

Good

Score: 3/3

Breakdown:

  • Implicitly identified the new required reserve ratio as 15% (derived from the correct final answer, although the working "1/5%" was unclear) (1 mark)
  • Correctly calculated the maximum deposits as $4000 million (implied from 600 / 0.15) (1 mark)
  • Correctly calculated the new money supply as $4100 million (100 + 4000) (1 mark)

Feedback:

Excellent. Although the notation "1/5%" was ambiguous, the final result indicated a correct understanding of the new required reserve ratio and the credit creation process. Clearer working steps are advised, especially for numerical values like reserve ratios.

12. Question 7

Excellent

Score: 4/4

Breakdown:

  • Correctly identified "not durable" and explained it with "may be damaged by the time kept" (2 marks)
  • Correctly identified "not divisible" and explained it with "the value of it will decrease after divide it" (2 marks)

Feedback:

Excellent. Two key characteristics of good money were correctly identified and explained.

13. Question 8

Needs Improvement

Score: 2/3

Breakdown:

  • Correctly calculated the opportunity cost of producing rice for both Country A (0.4W) and Country B (0.5W) (1 mark)
  • Correctly calculated the opportunity cost of producing wheat for both Country A (2.5R) and Country B (2R) (1 mark)
  • Failed to clearly state the range of terms of trade for mutually beneficial exchange (0 marks); characters were illegible

Feedback:

Opportunity costs for both goods in both countries and comparative advantages were successfully calculated. Marks were lost for not clearly expressing the range of terms of trade. Ensure the range is written in a readable format (e.g., 0.4W < 1R < 0.5W).

14. Question 9(a)

Excellent

Score: 2/2

Breakdown:

  • Correctly identified "junk food" as an "inferior good" (1 mark) and explained that "people prefer to have junk food when their income decrease" (1 mark)

Feedback:

Excellent.

15. Question 9(b)

Needs Improvement

Score: 2/4

Breakdown:

  • Correctly indicated the "QA" (quota amount) on the quantity axis (1 mark)
  • Correctly showed a rightward shift of the demand curve from D0 to D1 (1 mark)
  • Incorrectly drew the "kinked supply curve (S with quota)" – the "Sot quoda" line was a shifted supply curve, not a kinked curve reflecting world price and quota limits (0 marks)
  • Incorrectly positioned the final equilibrium point "EA" due to the incorrect supply curve (0 marks)

Feedback:

Understanding of demand shift and quota quantity was good. Practice drawing the kinked supply curve for a quota in a small open economy. The supply curve should reflect domestic supply, world price for imports up to the quota limit, and then higher domestic supply beyond that. This error affected the accuracy of the final equilibrium point.

16. Question 10(a)

Excellent

Score: 2/2

Breakdown:

  • Justified the statement by explaining that the fixed cost of masks constitutes a "larger percentage" of income for the low-income group (2 marks)

Feedback:

Excellent.

17. Question 10(b)(i)

Excellent

Score: 2/2

Breakdown:

  • Stated "No" (1 mark) and explained it's not a free good because it's "made of scarce resources which have alternativs of a use" (1 mark)

Feedback:

Excellent.

18. Question 10(b)(ii)

Excellent

Score: 2/2

Breakdown:

  • Stated "No" (1 mark) and explained it's not a public good because it is "rival in consumption" and one's consumption "will reduce the amount used by others" (1 mark)

Feedback:

Excellent.

19. Question 10(c)

Needs Improvement

Score: 5/7

Breakdown:

  • Verbal Explanation (4/4): Correctly explained subsidy increases supply, price falls, and quantity transacted increases (1 mark). Stated with inelastic demand, the percentage decrease in price is larger than the percentage increase in quantity (1 mark). Concluded consumer expenditure will decrease (1 mark). Linked price fall and quantity rise to supply increase (1 mark).

  • Diagram (1/3): Correctly showed a rightward shift of the supply curve (S1 to S2) (1 mark). Incorrectly labeled areas for "Decrease in Consumer expenditure" and "Increase in Consumer expenditure"; diagram did not correctly represent the (P0-P1)*Q0 and P1*(Q1-Q0) areas (0 marks). Condition (-) > (+) could not be assessed due to incorrect area labeling (0 marks).

Feedback:

Verbal explanation was strong, covering economic reasoning for decreased consumer expenditure with inelastic demand and a subsidy. Diagram needs significant improvement in illustrating the change in consumer expenditure. Practice drawing and clearly labeling specific rectangular areas representing the decrease and increase in consumer expenditure to demonstrate the net change.

20. Question 10(d)

Excellent

Score: 4/4

Breakdown:

  • Correctly identified masks provide private benefit (individual protection) and external benefit (preventing spread) (1 mark)
  • Correctly implied external benefit is uncompensated ("other people doesn't compensate") (1 mark)
  • Correctly identified positive externality and MSB > MPB or MSC (1 mark)
  • Correctly explained subsidy increases mask-wearing towards efficient level and reduces welfare loss (1 mark)

Feedback:

Excellent. Thorough and accurate explanation of positive externality and the role of a subsidy in improving economic efficiency.

21. Question 11(a)

Needs Improvement

Score: 1/2

Breakdown:

  • Did not provide a verbal definition of a deflationary (output) gap (0 marks)
  • Correctly indicated the initial deflationary gap (`gap1`) in Figure 2 (1 mark)

Feedback:

Correctly identified the deflationary gap in the diagram. Missed providing the verbal definition (the difference between aggregate output and full-employment output when aggregate output is below full-employment output). Always provide both definition and diagrammatic representation when asked.

22. Question 11(b)

Excellent

Score: 7/7

Breakdown:

  • Verbal Explanation (3/3): Correctly explained factory closures decrease short-run aggregate supply (SRAS) (1 mark). Correctly explained job losses and pessimism decrease consumption/investment, causing aggregate demand (AD) decrease (1 mark). Concluded aggregate output decreases, widening the deflationary gap (1 mark).

  • Diagram (4/4): Correctly shifted AD curve left (AD0 to AD1) (1 mark). Correctly shifted SRAS curve left (SRAS0 to SRAS1) (1 mark). Correctly showed new, wider deflationary gap (`gap2`) from both shifts (1 mark). Maintained LRAS curve (1 mark).

Feedback:

Excellent. Explanation and diagram were fully consistent and accurate, demonstrating strong grasp of AD/AS shifts and their impact on the deflationary gap.

23. Question 11(c)

Excellent

Score: 4/4

Breakdown:

  • Correctly identified "open market purchase of government bonds" increasing money supply (1 mark)
  • Explained increase in money supply leads to a decrease in interest rate (1 mark)
  • Explained decrease in interest rate stimulates private consumption and investment, increasing aggregate demand (1 mark)
  • Concluded this increases aggregate output and narrows the deflationary gap (1 mark)

Feedback:

Excellent. Steps of monetary policy through open market operations were clearly and logically explained.

24. Question 12(a)

Excellent

Score: 2/2

Breakdown:

  • Correctly identified "people prefer to have less child" (reflecting lower fertility) (1 mark) and linked this to "the rising cost of raising children" (1 mark)

Feedback:

Excellent.

25. Question 12(b)

Needs Improvement

Score: 1/2

Breakdown:

  • Correctly identified "More retirers" as a reason (1 mark)
  • The second point, "Population aging... more elderly in the society," was an elaboration of the first point rather than a distinct second reason for labor force decline (e.g., increased school enrollment or more homemakers) (0 marks)

Feedback:

Correctly identified the impact of more retirees. For multi-part questions requiring distinct reasons, ensure each point is separate and specific. Population aging contributes to more retirees but is not a separate mechanism for labor force decline unless linked to specific groups like increasing proportions of students or homemakers.

26. Question 12(c)

Excellent

Score: 7/7

Breakdown:

  • Verbal Explanation (4/4): Correctly explained fixed wage rate is "set below the equilibrium level" (1 mark). Stated "labor shortage one exists" (1 mark). Explained "importation of worker" leads to increased "worker supply" (1 mark). Concluded "the labor shortage still exists" but is "decreased" (1 mark).

  • Diagram (3/3): Correctly showed fixed wage rate (Wo) below equilibrium wage (1 mark). Correctly indicated initial shortage (demand minus supply at Wo for S1) (1 mark). Correctly showed supply curve shifting right (S1 to S2) due to imported workers (1 mark). Correctly showed a new, smaller shortage after the supply shift (1 mark).

Feedback:

Excellent. Explanation and diagram are fully consistent and accurate, clearly demonstrating the effects of imported labor on a market with a fixed wage and initial shortage.

27. Question 12(d)

Needs Improvement

Score: 2/3

Breakdown:

  • Correctly explained workers "remit part of their income to their country" (1 mark)
  • Incorrectly identified the current account component as "fantar incomey" (factor income); remittances are classified under "current transfers" or "secondary income" (0 marks)
  • Correctly stated that the "current accent will worsen" (1 mark)

Feedback:

Act of remitting income and its impact on the current account were correctly explained. Misidentified the specific component. Remittances are classified under secondary income (current transfers), not factor income (primary income). Factor income refers to earnings from factors of production like wages/profits/interest/rent. Practice differentiating between these current account components.

28. Question 12(e)

Excellent

Score: 14/14

Breakdown:

  • Aggregate Output (7/7):

    • Strategy I (Short-term): Discussed parents quitting labor, leading to SRAS↓ and uncertain/decreasing output (3 marks).
    • Strategy I (Long-term): Discussed larger population/labour force, leading to LRAS↑ and output↑ (3 marks).
    • Strategy II: Discussed importing workers, leading to AS↑ and output↑ (3 marks).

  • Government Expenditure (2/4):

    • Strategy I: Correctly identified increased spending on childcare and transfer payments leading to higher government expenditure (1 mark).
    • Strategy II: Correctly identified increased administrative costs for managing imported workers leading to higher government expenditure (1 mark).

  • Average Labour Productivity (4/5):

    • Strategy I: Discussion on productivity impact was vague and did not clearly align with specific points in the marking scheme (0 marks).
    • Strategy II: Correctly argued that importing skilled/educated workers would increase human capital and thus raise average labour productivity (4 marks).

  • Evaluation (1/1): Provided a comparative evaluation, suggesting Strategy II is better for immediate impact and where Strategy I's effects are uncertain (1 mark).

Feedback:

Essay demonstrated strong economic reasoning across most variables and good understanding of short-term and long-term effects.

  • Strengths: Excellent coverage of aggregate output and Strategy II's impact on labour productivity. Appropriate evaluation.
  • Areas for Improvement:
    • Government Expenditure: Could elaborate more on the magnitude or specific types of expenditures for full marks.
    • Average Labour Productivity (Strategy I): Discussion on Strategy I's productivity impact was unclear. Provide more concrete reasoning on how increased birth rates/childcare services could affect productivity (e.g., parents returning to work, long-term benefits from better-educated future generations, or potential loss of skills if parents leave workforce).
    • Clarity of Expression: Numerous spelling errors and grammatical issues (e.g., "pamats," "birth marn," "increse," "rede"). Improving written English will enhance clarity and potentially earn higher communication marks.

29. Question 12(f)

Excellent

Score: 2/2

Breakdown:

  • Correctly suggested "Raising the retirement age" (1 mark) and explained that this allows "retired and need to continue to work" (to allow more workers to continue working full time) (1 mark)

Feedback:

Excellent. A practical and well-explained strategy.

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